Jobenomics tracks both unemployment (see: Unemployment Scoreboard: December 2012) and employment (this posting).
Executive Summary. According to the US Department of Labor’s Bureau of Labor Statistics (BLS) December 2012 report , the US added 146,000 jobs in November. Unfortunately, based against the traditional benchmark of 250,000 jobs per month, the US is producing only half the number of jobs needed for a viable economic recovery as well as reducing the unemployment to pre-recession rates.
As shown above, for six decades, the US consistently produced tens of millions new jobs per decade. Then the bottom fell out with a loss of 1.2 million jobs in the ‘00s. Many believe that the Great Recession of 2008 caused such a catastrophic loss of jobs. Others believe that this is too simple an answer. Whatever the reason, it is critical that we produce a significant number of jobs this decade (’10s) for the US economy to recover. 20 million new jobs by year 2020 is a reasonable goal. Based on this goal, the US should have produced 8.75 million jobs by December 2012. We have only produced 4.53 million, which represents a 48% shortfall.
Today, the 133,852,000 Americans are employed. 93,589,000 (69.9%) work in service-providing industries. Service industries include businesses, like professional business services, education and health, financial, trade, retail, transport, distribution, and information-dominated businesses. 18,301,000 (13.7%) are in goods-producing industries that include manufacturing (8.9%), construction (4.1%) and mining. 21,962,000 (16.4%) Americans work for government at the federal, state and local levels. Since government employment is services-related, a total of 86.3% of all Americans work in service industries.
While the US has enjoyed some employment growth since the beginning of this decade, America is only producing about half as many jobs as needed. The US produced only 4,533,000 jobs compared to the 8,750,000 jobs needed as measured against the traditional benchmark of 250,000 jobs per month (250,000 x 35 months = 8.75 million). Of the three employment sectors reported by the Bureau of Labor Statistics, the private sector’s service-providing industries created 4,533,000 jobs, the private sector’s goods-producing industries created 517,000 jobs, and the government sector lost 517,000 jobs—with 80.7% (417,000) of all government jobs lost at the local level.
84.6% of all new jobs this decade were produced by four industries in the service providing sector (professional and business services; education and health services; trade, transportation, utilities; and leisure and hospitality). Manufacturing contributed 9.2%. The non-internet information and construction industries lost jobs during this decade. Government, at all levels, lost jobs.
Private sector businesses by company size. The following charts examine private sector businesses by size. As reported by the ADP National Employment Report (published monthly by the ADP Research Institute in close collaboration with Moody’s Analytics), data indicates that small business is the dominant economic force in terms of employment and job creation.
Since the beginning of this decade, small business produced 65% of all new jobs. This is an amazing statistic considering the adverse lending environment by financial institutions, mounting government regulation, and the pittance of federal government spending on small businesses.
It is a common misperception that small businesses dominate service-providing industries and large major corporations dominate the goods-producing industries. The following chart indicates that small and medium sized businesses play a major role in both good-producing (manufacturing, construction, and mining) as well as the services industries.
It is also a common misperception that small businesses, especially very small (1-19 employees), are the most fragile. The following chart indicates that very small businesses have been the most resilient of the five ADP business categories following the Great Recession of 2008. This fact cannot be understated in an environment where small businesses have been starved for investment capital from financial and government institutions.
Service-providing sector. The US service-providing sector now employs 93,589,000 and has grown 82% over the last three decades.
The US service-providing sector averaged 5% growth since the beginning of this decade with 4,533,000 new jobs created. Today, the US service-providing sector employs a total of 93,589,000 people across the seven industries shown below.
Employment statistics for industries in the service-providing sector are ranked by the number of jobs created between 1 January 2010 and 1 December 2012 (35 months):
- Professional/business services: 1,585,000 new jobs
- Education and health services: 1,102,000 new jobs
- Trade, transportation, utilities: 985,000 new jobs
- Leisure and hospitality: 808,000 new jobs
- Financial activities: 86,000 new jobs
- Other services: 75,000 new jobs
- Information (non-internet, like publishing): -108,000 jobs lost
The US service-providing sector averaged 5% growth since the beginning of this decade with 4,533,000 new jobs created. Only the Information (non-internet) industry lost jobs.
Goods-producing sector. The US goods-producing sector employs 18,301,000 and has declined 23% over the last three decades.
The US goods-producing sector averaged 3% growth since the beginning of this decade with 517,000 new jobs created. Today, the US service-providing sector employs a total of 18,301,000 people across the three industries shown below.
Employment statistics for industries in this sector are ranked by the number of jobs created between 1 January 2010 and 1 December 2012 (35 months):
- Manufacturing: 488,000 new jobs
- Mining and logging: 169,000 jobs
- Construction: -140,000 jobs new lost
While manufacturing has added about ½ million new jobs since the beginning of this decade, it has a long way to go to achieve peak its peak level of 19.6 million in June 1979 after sustaining a consistent growth rate from its post-World War II low of 12.5 million in September 1945.
While ½ million new jobs from manufacturing’s all time low (since WWII) of 11.46 million is positive, the manufacturing sector is still in the doldrums. While there is a lot of talk and enthusiasm about re-shoring of US manufacturing jobs and increased US productivity, Jobenomics forecasts limited upside jobs potential in manufacturing due to excessive government regulation, improved automation, and uncompetitive US labor rates (see Jobenomics’ Manufacturing Industry Forecast posting).
Jobenomics is also concerned by the amount political and public emphasis on the manufacturing growth as the primary engine for jobs creation. While manufacturing is vitally important to our nation, political emphasis needs to be on the high growth industries like mining, and the service sector. Manufacturing emphasis should be on protecting our gains and focusing on next-generation manufacturing technology, processes and recapitalization.
Construction industries continue to decline after a rapid rise during the go-go years in the 1990s and the housing bubble in the early 2000s. In the 2006-07 time period, peak construction employment was 7.7M. Today, it is 5.5M, a loss of -28%.
Residential construction was hardest hit with a decrease of -42%. Commercial and heavy construction fared slightly better with -23% and -18% losses respectively. Construction, lead by residential construction, usually leads economic recoveries. However, this recovery is different. Jobenomics forecasts that the residential construction industry will not produce a significant number of jobs for the remainder of this decade due to foreclosures, underwater mortgages, unemployment as well as changing attitudes to the value of homeowners. Due to the stagnant economy and government deficits, commerical and heavy construction is likely to produce a significant number of new domestic jobs. Jobenomics does see potential in major foreign construction projects, green construction and rennovation of older homes, and reconstruction of disaster areas like the Northeast after Hurricane Sandy. However, these bright spots will not make up for losses in other areas.
Mining (oil & gas extraction, coal and minerals) and logging goods-producing sector continues to be a bright area for employment growth. An increase of 169,000 jobs, with a growth rate of 25.5%, is significant. With proper private and public sector support, this industry has significant upside potential.
Mining exploration and support employment has more than doubled than doubled in the last decade and likely to double again with exploration for domestic energy sources. Oil and gas extraction is also likely to double with new natural gas, oil shale, oil sands and offshore oil resources are exploited via new technology, like horizonal drilling and fracking. Minerals mining employment has been stagnant over the decade, but this may change as commodity prices (gold, silver, copper) increase as well as worldwide demand for these commodities increase.
Government Sector. Total government sector employment currently is 21,962,000. Since 1 January 2010, government has lost -517,000 jobs, a negative 2.3% growth rate.
Employment statistics in this sector are ranked by the number of jobs lost between 1 January 2010 and 1 December 2012:
- Local government: 14,084,000 employees, -417,000 jobs lost, growth rate -2.9%.
- State government: 5,079,000 employees, -69,000 jobs lost, growth rate -1.3%.
- Federal government: 2,799,000 employees, -31,000 jobs lost, growth rate -1.1%.
The government sector continued to lose jobs with 81% of all job losses occurring with local government (mainly teachers, police and firefighters), 13% at the state level and 6% in the federal government (not including military which is also downsizing). Jobenomics predicts that government job losses will continue to decline and accelerate at the federal and local levels especially if the US economy suffers an economic disruption due to either domestic or foreign events.
In conclusion, business and jobs creation is the number one issue facing US economic recovery. While some would argue that debt/deficits or entitlement/welfare are the biggest issues, it takes businesses to create lasting jobs that generate tax revenue to run government as well as supporting the less fortunate. The following chart is about as simple as Jobenomics can make it.
32% of all Americans are financially supporting the rest of the country. 102 million workers in the private sector are supporting 32M that work for government (including contractors), 89M that can work but choose not to work, 70M that cannot work (children, retired, disabled, etc.) and 23M that are looking for work (officially unemployed and unemployed). America’s number one priority is to grow the base with emphasis on small business creation, which produced 66% of all new jobs this decade.
 Bureau of Labor Statistics, Economic News Release, Employment Situation Summary, 7 Dec 2012, http://www.bls.gov/news.release/empsit.nr0.htm